Four Prediction-Market Platforms Put to the Test as Order Books and AMMs Diverge

Polymarket is a blockchain-based decentralized prediction market where contract prices are generally treated as the probability of an event occurring. Research found that the platform may not adjust prices simultaneously when markets have complex logical relationships, such as mutual exclusivity or inclusion. Quantitative traders can exploit those discrepancies by combining positions to lock in spreads, exposing a structural efficiency gap in Polymarket's pricing mechanism.

Research findings released as of July 2026 showed that traders used Bregman projections and the Frank-Wolfe algorithm to identify inconsistent probability pricing across Polymarket contracts and construct approximately risk-free arbitrage portfolios. The model estimated that such strategies generated close to $40 million in cumulative profit over the past year, indicating that the mispricing was not a short-lived anomaly confined to a single market.